Tim Hannagan's Weekly Grain Report 9-20-13

Published on: 13:39PM Sep 20, 2013

Tim Hannagan's Weekly Grain Report 9-20-13

This is Tim Hannagan its Friday, September 20.  The demand side reports were the highlights of the week.  Monday’s 10:00 AM CDT weekly export inspection report showed 20 million bushels of corn was inspected for near-term shipment, up from 9.9 the week prior, and the four week average of 11.  After being absent from the market the last four weeks, China came in for 2.5 million bushels. Exporters are anxious for importers  sitting on their hands,  waiting for  harvest low prices to occur before buying . 

The recent 50 cent drop in prices has uncovered a little demand, but it’s far from being bullish. With corn down a dollar since the June highs, and the harvest underway in the southern delta and ready to move into the Midwest in another week, importers in need of corn and domestic users may jump on the recent break in prices.  With key yield development time over, and weather no longer important towards production, we move into a demand driven market.

 Monday’s export inspection report showed 46 million bushels of wheat were inspected for near-term export, versus 31.6 the week prior and four week average of 33.  China was a hefty buyer for 15 million bushels, and Brazil 6.8.  Top  world buyer Egypt was absent. The 46 million bushels was a five-year high number. Thursday’s weekly export sales report showed 704,000 metric tons of wheat was sold for future shipment in the new marketing year, up 30% from the previous week and 25% over the four week average.

With soft red winter wheat, and hard red winter wheat inventories at six year lows, and world wheat stocks at five year lows, and demand for U.S. wheat 8% over the five year average, we saw trend following funds ,who entered the week short 83,000 contracts, begin to buy back some of those  positions this week.  They may not want to go long this market, but holding a near record short position could mean they do not want to be as short. 

Weekly export sales for beans were 923,000 metric tons.  660,000 metric tons went to China.  Chinese companies signed an agreement this week with U.S. exporters to buy 4.8 million tones of us beans, probably for near-term shipment the next five months, and then Brazil’s crop comes in.  Private exporters reported the sale of 1.9 million tons of soybeans  to China for the new marketing year.  The sale was the fifth largest on record.  Export sales for beans have been softening the last two weeks after hitting contract highs of 14.08 per bushel, leaving China and other importers to back away from the market. This week’s sale of 1.9 million tons for the new marketing year shows the 70 cent break in the market was enough for importers to come right back.

Unless something new enters the market for corn, we look to hold resistance of 4.64 and test next support of 4.46.  Worst case scenario for December corn is  4.20 basis December futures.  If November beans close under 13.35 next stop is 12.80.  The worst case scenario for November beans would be 11.65. To get there would take several things; harvest unveiling better than expected yields, and an October 11 USDA crop report without any bullish surprise.  December wheat support remains 6.40 with resistance at 6.70. A close over 6.70 would be a very bullish chart pattern which could prompt  trend following funds, short 83,000 contracts, to start covering all shorts and a quick move to 7.30. Grains look to start the week lower Sunday night into Monday off  weather reports  suggesting  no threat of any frost or freeze entering and  ample rain fall for maturing corn and beans.